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Sunday, October 21, 2012

Iran is likely to adopt a new and aggressive stance on the nuclear matter because Iranian leaders surmise that they can change the game. This position, however, may lead to an all-out war.

Following the European Union ministers meeting in Luxembourg

on October 15, more sanctions were announced against Iran. According to the new set of sanctions all transactions between European and Iranian banks will be prohibited, except those with advance official permission or for humanitarian purposes, sources report. Analysts say that as a result of new sanctions Iran will lose the ability to clear its oil money in Euros. While Iran is already locked out of US transactions, these new EU sanctions can paralyze the country’s trade.

David Cameron, the British Prime Minister, in a speech to the United Jewish Israel Appeal in London, said: “I have said to Prime Minister Netanyahu that now is not the time for Israel to resort to military action.” He added, “The regime faces unprecedented pressure and the people are on the streets...We need the courage to give these sanctions time to work.”

Part of Mr. Cameron’s assertion is true. The economic situation in Iran is becoming perilous. As the national currency crisis unfolds, inflation is spiraling out of control. Sanctions have reduced Iran’s oil production to a 22-year low, while sanctions have also made it extremely difficult to access and transfer oil money. Mohsen Rezaii, Secretary of Iran’s Expediency Council, remarked, “They have made trade difficult for us. They don’t let us sell oil and when we sell oil, don’t let us get our money from the Chinese bank[s].” Iran’s Supreme Leader Ayatollah Khamenei, who in the past dismissed the effects of sanctions, for the first time during an angry speech, said, “These sanctions are barbaric. This is a war against a nation.”

However, Mr. Cameron and policy-makers in the US completely ignore the fact that the status quo is precariously unstable. It would be a grave mistake to assume that the Iranian government will stand idly by while gripped by paralyzing sanctions, and with its very survival threatened.

The potential for retaliation by Iran against sanctions has been a concern for the West in recent years. Iran repeatedly states that it has the capability of closing the Strait of Hormuz. Last month’s massive minesweeping exercise in the Persian Gulf, led by the US, reflected this West’s concern.

Earlier this year, Saudi Arabia and United Arab Emirates opened new pipelines that when they become fully operational will be able to bypass the strait and handle 6.5 million barrels of oil per day. The figure represents 40 percent of the oil exported from the region. However, still the majority of oil must be traded by using supertankers that should pass through the Strait of Hormuz. Besides Iran, Kuwait, Qatar, and Bahrain do not have any alternative route to ship their oil.

Until recently, observers reasoned that the likelihood of Iran closing the strait would be slim because Hormuz is the only route for Iran’s oil exports, and the main route for its food imports. This calculus, however, appears tottery and uncertain today, as Iran’s oil export plummets, clearing its oil money becomes extremely hard, and its economy steeply declines.

With sanctions tightening, dangerously reduced oil revenue may lead Iran’s leadership to the conclusion that a radical move in the Strait of Hormuz is a calculated risk that could ultimately change the game in favor of Iran.

Contrary to the US officials’ perception, keeping the Hormuz Strait open is not the issue. The crux of the strait issue resides in keeping it safe and secure, thus guaranteeing uninterrupted flow of oil. As Zbigniew Brzezinski, current international relations professor at John Hopkins University maintains, once the strait becomes a dangerous place the price of oil will skyrocket even it is not closed.

Iran can disrupt energy supplies - including oil and 20 percent of globally-traded liquefied natural gas - without closing the strait. In July 2012, Fars News, the news agency which reflects viewpoints of the Iranian Revolutionary Guards Corps (IRGC), published a long, meticulously researched, and noteworthy paper titled, “A study about the role of the Strait of Hormuz in the balance of power between Iran and the West.” The paper read:

“...complete closing of the strait by the Islamic Republic of Iran for extended duration may lead to the formation of an international coalition against Iran...therefore it doesn’t seem a logical option. But another option for the Islamic Republic of Iran is to imperil those traveling through the Strait of Hormuz...The outcome of this action would be the formation of a crisis in the global economy and a divergence between oil consuming countries and America. Meanwhile, as the economies of Europe and America toil, any disruption in oil supply will intensify the crisis. In fact, closing the Strait of Hormuz would mean, ‘making naval transit unsafe and the region look like a war zone,’ so that no government feels immune to an attack by [our] conventional armed forces, unidentified boats, or naval mines.”

Iran may use proxies to carry out attacks without directly becoming involved or simply stop supertankers from passage through its territorial waters in the narrowest parts of Hormuz, under the pretext of inspection. As oil prices soar, the conflict between Iran and the US could spiral, and ultimately transform into a disastrous military conflict.

The root cause of the deadlock over Iran’s nuclear program is the demand by the US (and of course Israel) for “zero-enrichment.” This exaction will most likely meet with insouciance, regardless of how much pressure is imposed on Iran. Iran’s leadership, even if it wanted to, could not agree with any resolution resulting in the complete suspension of their uranium enrichment program, due to the reasons and perceived costs that this author have discussed before.

The current pattern exponentially heightens the potential for a military conflict, unless demands for the complete suspension of uranium enrichment are replaced by strict and intrusive monitoring by inspectors of the International Atomic Energy Agency (IAEA) to limit Iran’s enrichment of uranium.

For the moment, US presidential elections have stifled new developments. Once the elections conclude, whether for the current US administration or a new president and his cabinet, Iran, most likely appearing dangerous, will take the center stage.

*This article is part of Insider & Insight, a new AIC program aimed at providing different perspectives and analyses on key developments in US-Iran relations. The commentary and opinions expressed herein are solely those of the author and do not reflect the official position of American Iranian Council.

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